Alternatives to incorporating a company in Switzerland

business in switzerland

Whether you are working as an individual entrepreneur registered in Ukraine or in Switzerland, or have an already established legal entity in Ukraine, formally relocating the company or constituting a new one in Switzerland may be very useful for your business henceforth carried out in Switzerland.

However, the rules for classical incorporation of a Swiss legal entity might seem costly, time consuming and generally burdensome, with many risks of failure, especially for foreign immigrants in Switzerland. Fortunately, there are some lifehacks on how to circumvent these hardships and still reach your goal to operate as a limited liability company in Switzerland.

There are companies for sale

Thousands of companies get set up and liquidated in Switzerland every year. For the current owner of such entity, which no longer carries out any activity nor has any substantial asset, formal liquidation seems yet as another burden as the costs for accounting, liquidation procedure and administrative taxes are quite high, while the time spent to pass all the fiscal controls required for strike off make take over a year.

Hence, many companies remain dormant without formal liquidation, and for their owner it is often interesting to sell it at a very modest price, sometimes a symbolic 1 Swiss franc if the company has no assets or negative equity. The buyer can then purchase the company, change its name, purpose, legal seat, or anything else, as well as to appoint himself as the new director. Depending on the scope of changes, the administrative costs may be reduced to bare minimum, while no costs shall be incurred for notary and no initial capital is required.

However, there are some drawbacks to carefully consider. First, the sold company may have undisclosed legal or financial risks which will later become apparent to the buyer and may suddenly increase the company’s expenses. Second, if the company’s equity is positive, a withholding tax on dividend and the federal stamp tax may apply as tax administration may regard this operation as “factual liquidation”, and therefore to treat the sale as if there would be a liquidation with subsequent incorporation of a new entity. It is therefore important to have credible financial statements of the company, to perform due diligence and to make sure the company has no retained profits.

Swiss branch in lieu of a full company

Unless it already exists, it is also possible to register a legal entity in Ukraine or any other country where the initial share capital requirement is much smaller, as the minimum amount in Switzerland is CHF 20’000. As a second step, this foreign entity may open and register a branch in Switzerland, which initself requires neither initial capital nor notarized document, hence a much cheaper and faster option.

Any profits directly attributed to the branch shall only be taxed in Switzerland, and must be exempt abroad, provided a double-taxation treaty exists with the state of incorporation, which is indeed the case with Ukraine or any EU country.

Contribution in kind or transformation

A common barrier to entry into the field of limited liability is the initial share capital, although this amount might not be necessary to operate the business as projected. On the other hand, the shareholder may have various assets, either personal or those belonging to a registered individual enterprise. It is therefore possible to incorporate a company by a contribution in kind of such assets, provided an independent auditor certifies that their market value is at least that of the initial capital amount. By conversion, it is also allowed to contribute all assets and liabilities of the individual enterprise, however, with some additional requirements.

On one hand, this procedure is a little costly and time consuming. On the other, there is no strain on liquidities as instead of blocking CHF 20’000, assets may be used. However, it is important that if such assets are later used by the shareholder for personal purposes, a fair market rent should be paid to the company, or compensated with the director’s salary (salary in kind).

Incorporation in chain

Another frequent issue for foreigners in Switzerland is that Swiss banks refuse to open escrow accounts for initial capital release. Conversely, the company does not necessarily need a Swiss bank account to operate.

Therefore, a common solution is to find a Swiss person of trust and lend him CHF 20’000 to incorporate a company in his own name. Subsequently, the Swiss bank account used for escrow deposit is liquidated and funds are transferred to a foreign commercial bank account of the company. Finally, the company is then sold back to the real founder in compensation of the loan. As of then this company can easily operate with a foreign bank account, therefore avoiding the blocking by Swiss banks due to compliance reasons.



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